December 4, 2008
SALARTASH SURGICAL ASSOCIATES, L.L.C., PLAINTIFF-APPELLANT,
MICHAEL P. DEL ROSARIO, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Chancery Division, Atlantic County, C-198-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 29, 2008
Before Judges Gilroy and Chambers.
In this breach of contract case, plaintiff Salartash Surgical Associates, L.L.C. appeals from the order of August 10, 2007, dismissing its claims for damages with prejudice.
Plaintiff engages in the practice of medicine and surgery in Atlantic and Cape May Counties. In 2002, it entered into a three year employment contract with defendant Michael P. Del Rosario, a surgeon. Under the terms of the contract, either party could terminate the agreement upon sixty days notice. In addition, the contract contained a restrictive covenant prohibiting defendant from practicing medicine within a twenty mile radius of plaintiff's offices while employed by plaintiff and for a period of two years after he left plaintiff's employ. After this arrangement continued for a one year period, conflicts between the parties arose, and defendant gave sixty days notice that he would be leaving plaintiff's practice. However, defendant left during the sixty day period, each party blaming the other for why he did so. Defendant then opened an office within the twenty mile radius in breach of the restrictive covenant.
Plaintiff filed this lawsuit against defendant, asserting, among other claims, that defendant breached the sixty day notice provision and the restrictive covenant. The trial court denied plaintiff's application to enforce the restrictive covenant and enjoin defendant from practicing within a twenty mile radius of plaintiff's offices.
Following a bench trial, the court found that defendant had breached the contract by refusing to perform surgery within the sixty day period after giving notice that he was going to leave plaintiff's employ. Although finding that the restrictive covenant was valid, the trial court declined to enforce it. It also dismissed with prejudice plaintiff's damage claims for breach of the restrictive covenant. Plaintiff then took his first appeal.
On appeal, plaintiff conceded that due to the passage of time, enforcement of the restrictive covenant was moot. However, it contended that it was still entitled to damages for breach of the restrictive covenant and for breach of the sixty day notice provision. We agreed and reversed, finding that plaintiff was entitled to pursue its claims for damages for defendant's breach of these two provisions in the contract. Salartash Surgical Assocs., LLC v. Del Rosario, No. A-1420-05 (App. Div. Mar. 27, 2007).
On remand, plaintiff sought compensation for certain expenses it had incurred, namely, the placement fee it paid to a search agency for services rendered in the hiring of defendant ($17,000); staff fees, professional dues, and other fees it paid on behalf of defendant ($2,425); the amount of reimbursement it paid defendant in parking fees, tolls and other travel expenses ($3,974.49); medical malpractice insurance it paid for defendant ($17,526); and advertising expenses it paid for defendant ($15,600). Plaintiff characterizes these damages as representing its investment losses, and contends that they are compensable. Notably, plaintiff did not seek damages for any lost profits due to defendant's breach of the restrictive covenant, nor did it seek damages for any additional expenses or losses it may have incurred due to defendant's departure within the sixty days notice period. These claims were not made, apparently due to the difficulty in proving those kinds of losses. Defendant moved for summary judgment contending that the damages plaintiff sought are not legally compensable.*fn1
The trial court granted summary judgment finding that plaintiff's expenses did not constitute compensatory damages recoverable for breach of contract, concluding that they did not arise from the breach of contract, and if awarded, payment would not have put plaintiff in the position it would have been in had there been no breach.
On appeal, plaintiff contends that the trial court erred in failing to allow these damages as compensation for the breach of contract. Relying on Community Hosp. Group, Inc. v. More, 183 N.J. 36 (2005), plaintiff argues that these so-called investment expenses are allowed as damages when a doctor breaches a restrictive covenant.
Community Hospital concerned the enforceability of a restrictive covenant against a doctor. Ibid. In that case when considering whether "the restrictive covenant was necessary to protect the employer's legitimate interests in enforcement," one of the requirements to enforce a restrictive covenant, the Supreme Court noted that the employer's legitimate protectable interest included "(1) protecting confidential business information, including patient lists; (2) protecting patient and patient referral bases; and (3) protecting investment in the training of a physician." Id. at 57-58. At the end of the opinion, the court noted that the employer's claim for damages included but was "not limited to the loss of patients." Id. at 64. Based on these statements in Community Hospital, plaintiff maintains that it is entitled to recover its investment damages.
In reviewing an appeal from a decision on motions for summary judgment, we employ the same standard applied by the trial court. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). Summary judgment will be granted where no genuine issue of material fact is present and the movant is entitled to judgment as a matter of law. R. 4:46-2(c). Where the facts are not in dispute, but a question of law is presented, our review is de novo. Paradise Enters. Ltd. v. Sapir, 356 N.J. Super. 96, 102 (App. Div. 2002), certif. denied, 175 N.J. 549 (2003).
After a careful review of the record and the arguments of counsel, we affirm for substantially the reasons set forth by the trial court. We add only the following comment.
The Community Hospital case does not provide authority for the so-called investment damages plaintiff is seeking. The reference in Community Hospital to the investment the employer made in training the doctor, related to whether the restrictive covenant was necessary to protect the employer's legitimate interests, a necessary requirement to enforce a restrictive covenant. See Community Hosp. Group, Inc. v. More, supra, 183 N.J. at 58. The Court stated that a legitimate interest in enforcing the covenant included the employer's interest in protecting its so-called investment in the doctor. Ibid. Notably, this reference to the investment costs was in the context of determining the enforceability of the restrictive covenant and not in fixing damages for its breach. The mere statement at the end of the opinion that the employer may recover for damages other than loss of patients, does not necessarily mean that the investment costs are recoverable. Lost profits and diminution in the value of the practice are other ways to measure the damages. The Court in Community Hospital did not determine that the investment costs of the employer are compensable when the restrictive covenant is breached.